Guidelines for Estimating Direct Operating Costs and Reserves

Guidelines for Estimating Direct Operating Costs and Reserves

As a rule-of-thumb for initially setting rates, the hourly contribution for Routine Maintenance (Engine and Airframe combined) can be roughly equated to one-half the hourly cost of fuel and oil. ($20 for all maintenance vs. the $23.75 in our example here).  Appropriate adjustments can later be made based upon actual operating experience.

Fixed Operating Costs     (this sample @ 100 flying hrs/year)

$ Per Hour

Loan payment. Principle and interest.

 

Insurance

 

Hangar or tie-down

 

Sub-total fixed costs per hour = F

 

Direct Operating Costs

$

Fuel  ( 1 )

 

Oil  ( 2 )

 

Landing/ramp fees

 

Annual inspection ( 3 )

 

Maintenance  ( 4 ) 

 

Sub-total direct costs per hour = D

 

Sub-total: fixed + direct costs per hour =  F + D

 

Reserve Account(s) + Variable Expenses

 

Engine/propeller reserve (save to overhaul)  ( 5 ) ( 6 )

 

Improvements reserve: paint, interior, avionics, etc. etc.

 

Variable: catch-all, or unexpected

 

Sub-total: optional to include reserve and/or variable in the total

 

Total Cost Per Flight Hour

$

These guidelines provide a basis for determining aircraft operating costs. The actual cost will vary depending on aircraft type, age, and utilization.  Records of actual cost should be maintained for each aircraft in order to make adjustments to the guidelines.

  1. $ / GAL X GPH = $ per hour
  2. $ /QT X QPH = $ per hour (include oil service charges if any)
  3. As a rule of thumb, for initially setting rates, the hourly contribution for Routine Maintenance (Annual Inspection, Engine and Airframe combined) can be roughly equated to one-half the hourly cost of fuel and oil.  Appropriate adjustments can later be made based upon actual operating experience.
  4. As a starting point, set asides for avionics maintenance can be estimated as 5% of the current replacement value of the avionics installed per 500 hours of flying.  ($ value of avionics x 0.05/500 = $ per hour)
  5. Based on the average cost of replacement with factory remanufactured engine or overhaul of existing engine.  Use either the manufacturer's recommended TBO, or, time remaining until that TBO on your aircraft, and, simply divide the cost (spread the cost) by the hours of use. Cessna 172 overhaul @ $17,000 divided by the TBO (estimated time between overhauls) of 2000 hours = $8.50 per hour. Note: the factory remanufactured engine cost is $27,000. Upon purchase, the aircraft probably already has flying hours on the engine. If you are at 1100 hours on the current engine you will have about 900 hours to go. If a reman engine is chosen, now the math is $27,000 divided by 900 = $ 30.00 per hour.
  6. Propeller overhaul estimates are $0.25/hr for fixed pitch props and $1.00/hr for a constant-speed prop. More for a 3-blade.